Starknet Introduces Wallet Privacy Feature for DeFi Activity

Starknet's shadow accounts let users conceal the links between their main wallet and DeFi activity, though transactions remain visible on-chain.

Starknet shadow accounts allow users to hide connections between their main wallet and DeFi activity, although transactions remain visible on-chain.

Ethereum's Layer 2 network StarkNet has launched a wallet privacy feature that allows users to interact with decentralized finance (DeFi) applications without publicly linking activities to their main wallet.

StarkWare, the team behind Starknet, said the new Shadow Accounts feature creates separate, permanent addresses for applications. Users can fund accounts using protected balances in the network's STRK20 privacy pool. This allows them to maintain lending, trading or other DeFi situations under different chain identities.

The new privacy feature hides the connection between the shadow account and the wallet that funds it. However, according to Starknet, the balances, transactions and positions of these shadow accounts are visible on the public chain.

Once integrated into a DeFi application, this feature allows users to link their wallets, switch from public to private, and store assets in a fund. Their shadow accounts then hold their position until they return the funds to a protected balance.

StarkWare said this functionality could eventually expand beyond funds to liquidity provision, lending, borrowing, equity, derivatives trading, prediction markets and NFT markets.

The launch follows StarkWare's broader blockchain privacy push. In June, the company announced its STRK20 privacy framework, which allows for private transfers and protected token balances on Starknet.

Later that month, StarkWare unveiled a Private Know Your Customer system that allowed users to verify their personal information without revealing full credentials.